1. The Applicant has filed this application under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (The SARFAESI Act, 2002) challenging the action taken by the Respondent Bank under The SARFAESI Act.
2. Briefly stated facts are that the Applicant had taken the property in question on lease rent from the Resp. No. 2 as per Lease Deed dt. 16.08.2013 (Exh. A5) and has since been paying lease rent regularly to Resp. No. 2 in which service tax and other taxes have also been paid uptil 09.01.2014 when officials of the Respondent Bank disrupted the running unit and done illegal marking on the machineries without verifying ownership status which the Applicant had purchased from time to time after taking the premises on lease. It has been stated that the Resp. Bank knew that the possession is not with the Resp. No. 2 and to establish its occupancy VAT number and Form VAT G1, Electricity bills, salary vouchers etc. have been filed on record (Exh. A7, A11 and A12). Hence, the Applicant has stated that since it is paying rent regularly to Resp. No. 2, it cannot be ousted from the premises without due process of law.
It has been stated that after receipt of notice dt. 16.01.2014 on 21.01.2014 from the Bank for selling the machines, the Applicant through letter dt. 24.01.2014 asked the Bank to withdraw the notice since the Bank has nothing to do with machineries and other assets owned by the Applicant whereas it can take action against the Resp. No. 2 and his machineries for which it was ready to provide details.
The Applicant has stated that issuance of Notice under Sec. 13(4) to other respondents without information and knowledge of the Applicant who is in actual possession of the premises is fraud and should be set aside.
3. The Respondent Bank in its Reply has stated that the Applicant Company is a close associate of borrower company (Res. No. 2) and the property stated consists of Hissar unit of Resp. No. 2 company upon which the factory is constructed. The land and building was mortgaged with the Bank and the plant and machinery is hypothecated to the Bank. Since the Resp. No. 2 had approached the bank to sell land and building and proceeds shall be deposited in the account, the same was released on 18.04.2013 (Exh. R1). The registered lease deed dt. 16.08.2013 has been executed subsequent to the creation of charge of hypothecation (Exh. R2). It is thus clear that the Applicant has not enquired before taking property on lease. It has been stated that the Bank is not at all trying to dispute possession of the Applicant Company in the premises since the charge is modified. The Bank has only taken action qua plant and machinery which is hypothecated with the bank and has taken possession of the machinery and taking steps to sell the same. It is incorrect that the Applicant had purchased any machinery. Bare perusal of the Bills produced on record (Exh. A) will reveal that the same are fabricated.
It has been stated that the tenancy was created in August 2013 immediately before the account was to be classified as NPA. In fact the promoters of the company have created this fake transaction and are still in possession of the premises. Moreover, because the applicant company is in possession does not make it the owner of the property. Further, the Bank is proceeding against entire plant and machinery and fixed assets which are hypothecated with the Bank. It has been stated that the Bank while initiating its action duly declared the account NPA, issued notices under Sec. 13(2) and Sec. 13(4) which were duly published in two newspapers also. Since the Applicant company is neither owner nor borrower, therefore, it is not entitled to any notice under the provisions of The SARFAESI Act.
4. The Applicant has marked Exh. A1 to Exh. A19 whereas Respondent No. 1 has marked Exh. R1 to Exh. 6 on its side.
5. The counsel for the applicant has argued that it being a third party having taken premises on lease, all the machinery and goods belong to it. Further the Applicant has claimed that they are bonafide lessee as per lease deed dated 16.08.2013. The Applicants have further claimed that the loan given to the Resp. No. 2 borrower company is totally different and that plant and machinery belongs to the Applicant Co. and that the Bank has failed to place on record the detail of inventory as well as other required documents and prayed that the SA be allowed.
6. On the other hand side, the counsel for the Respondent Bank argued that the Resp. No. 2 M/s. ARCEE Ispat Udyog Ltd. is the borrower company and that this is proxy litigation being filed by the Applicants. He further argued that lease deed was created with the intention to defraud the Bank just when the account was to be declared NPA. In fact the Respondent Bank has contended that this lease deed was executed only just to avoid and delay the recovery process initiated against Resp. No. 2. He further pointed out that the property consists of Hissar Unit of Resp. No. 2 company and the plant and machinery are duly hypothecated as the same was under the charge of the Bank as per Exh. R2. Moreover, as per Term Loan Agreement (Exh. R4), the first charge on all existing as well as future assets and mortgage of land is duly under the Bank. Counsel for the Bank has further drawn my attention towards this fact that the charge is duly noted with the Registrar of Companies and is still existing and by merely showing fake bills, the Applicants cannot claim their ownership on plant and machinery particularly when the same were purchased with the funds of the Bank and duly hypothecated to the Bank. The counsel for the Bank has further pointed out that the inventory of the Bank is totally different of that alleged to be of the Applicant and by producing fake bills that too some electronic Co. cannot make them owner. In fact the Respondent Bank's contention was that how within one month after taking lease the company started production and only bills were produced and no payment was shown. Further elaborating the arguments, counsel for the Bank disclosed that one OA is also pending and that the Respondent No. 2 has siphoned off the funds.
He further pointed out that the Applicant, who was not given interim relief had not applied for a copy of the same even, but filed one Civil Writ petition before Hon'ble High Court giving wrong impression and averments before the Hon'ble High Court that interim order was not passed, due to which they were successful in getting stay on 29.05.2015 from Hon'ble High Court.
Ultimately, the counsel for the Bank prayed that the bills which were placed on record are procured, fake and fabricated and tried to prove that company who has been alleged to have supplied machinery does not deal in the machinery related to the unit. Moreover, such type of machineries is supplied through M/s. Orient Transport Company and the challans numbers are manually marked. The documents are forged is clear from the fact that the signatures are of the same person who have signed other bills and challans. He also denied that the Applicant has made huge expenditure in renovation. Moreover, the Respondent Bank is claiming only action against plant and machinery which is duly hypothecated and nothing against other properties. He has further drawn my attention towards the fact that the lease was created on 16.08.2013, how production could start immediately thereafter in September, 2013, particularly when there is no renovation done or there is no new plant and machinery brought in. Hence, it shows that fake and fabricated documents were created just to mislead the court.
7. I have heard arguments of both the Counsel and perused the record.
Before the prayer of the Applicant could be considered, it has been found that earlier too the Applicants had moved one IA 429 of 2015, with same issues which was dismissed with cost of Rs. 10,000/-, which is reproduced hereunder:
"IA No. 429/15
It is pleaded in the IA that the respondent bank has initiated the proceedings under of the provisions of the SARFAESI Act and started the sale process of plant and machinery which is owned by the applicant company including the machines of the respondent No. 2 even after knowing that the applicant company has no privity of contract with the respondent bank and the machinery which is owned by the applicant company is not charged with the respondent bank. It is further pleaded that the respondent bank knowing fully well that the premises in question are no longer in possession of the respondent No. 2 and manufacturing activities of the applicant company are no where connected with the business activities on the machines owned by the applicant company. It is also stated that applicant company is in possession of the immovable property bearing 7th KM Stone, Barwala Road, Hissar and has installed huge plant and machinery in the factory premises and the respondent can only proceed against the assets owned by respondent No. 2 and the respondent bank has legal right to sell the machinery and other fixtures and fittings owned by the applicant company. The applicant has relied upon where is documents annexed Ann.A-1/3 to A-1/6.
In reply to IA, it is pleaded by the respondent bank that the plant and machinery of which physical possession was taken by the bank, was owned by M/s. Arcee Ispat Udyog Ltd. and denied that plant and machinery in question is owned by the applicant company. It is also stated that plant and machinery lying in the Hissar unit and in physical possession of the respondent bank and same is duly hypothecated with the bank and certificate of the charted accountant does not show that the plant and machinery which is being sold belong to the applicant. It also denied that any manufacturing activities are being carried out on in the said factory and the plant and machinery being very heavy could not be shifted and therefore the bank has put its guards on the premises.
I have heard the arguments of both the counsel at length and perused the record.
The detailed lengthy arguments of the applicant are precisely on the issue of plant and machinery allegedly owned by the applicant company and the bank in a wrongful manner deliberately showing the same to be hypothecated with the bank put the same on sale along with other properties which does not belong to the defaulter company and therefore the bank should be restrained from selling the plant and machinery segregating it from the hypothecated plant and machinery.
Before parting with the orders, I have scrutinized the file and found that the applicants are habitual in filing the IAs particularly when the case which is otherwise fixed for final arguments along with connected matters being SA No. 27/2014, Suma Fabrics and Allies v. AO PNB and SA No. 28/2014, M/s. Haryana Foils Ltd. v. PNB are mature for arguments. It could not be denied that applicants are closely in relation of the main defaulter M/s. Riddhi Steel and the objection of the respondent bank is duly endorsed from the record that the applicants are trying to misuse of the process of law by filing these applications particularly when physical possession of the property has been taken long back by the bank and moreover the case is otherwise mature for arguments since 20.03.2014. The applicant instead of coming forward to argue on the main SA chose to file this IA.
I am fully agree with the counsel for the respondent bank who took a preliminary objection to consider this application to be a misuse of process of law by vehemently opposing this IA being another attempt to delay the matter which is otherwise fixed for final arguments in which interim stay has already been declined and when the bank has already put this property on auction it in no manner gives any cause of action to the applicant to file the present application.
On the basis of those documents relied upon by the applicants they cannot claim themselves being owner of the plant and machinery and reiterated its stand that plant and machinery and moreover plant and machinery which is in physical possession of the bank is owned by M/s. Arcee Ispat Udyog Ltd. for which stay has already been declined and raising this issue in the present application is nothing else but an another attempt to delay the matter as there is no manufacturing activity in the unit. The unit which is under the bank since long and moreover documents in the shape of certificate of chartered accountant and others are not sufficient to prove that plant and machinery which is being sold belongs to the applicants and premises of the factory which is lying closed without any manufacturing activities should have to be allowed to recover the dues and this being another attempt made by the applicant to derail the process of recovery should be discouraged.
In fact the applicants who are daughter-in-law, son and grandson of Shri R.C. Gupta who is director promoter of borrower company (Respondent No. 2) are at liberty to take appropriate remedy against respondent No. 2 through civil and criminal action.
Hence finding force in the arguments of the counsel for the respondent bank and finding no merit in favour of the applicant, the same is dismissed being devoid of merits, with cost of Rs. 10,000/- to the counsel. "Order dasti"."
It is worth mentioning that the Applicants on dismissing of this application approached the Hon'ble High Court even though the SA was pending for adjudication before this tribunal for final arguments for which the Applicant themselves were delaying the proceedings. The Applicant approached the Hon'ble High Court with the prayer that no order on interim was passed by the Tribunal. I am constrained to observe that this was an attempt on the part of the Applicant to mislead the Hon'ble High Court by presenting facts in a distorting manner. In the Writ Petition, the Applicant has attempted to convey entirely wrong impression that this Tribunal had not passed any order on his interim Application. The facts as noticed thereafter would in itself reveal that the impression conveyed before the Hon'ble High Court was false.
The Applicant is a closely related family member of the Respondent No. 2 as earlier also filed SA No. 27 of 2016 and SA No. 28 of 2016 and in fact was just trying to mislead this court and also pursuing proxy litigation for which the orders passed in the IA clearly depicts the entire position. Therefore, the same was dismissed with a cost. It cannot be ignored that adjournments had primarily been on account of one move or the other made by the Applicants themselves and if the copies of the same were not supplied/late supplied, it was procedural delay on the part of the Registry which is not under direct supervision of the Presiding Officer. It would not be inappropriate to make a mention of difficulties being faced by the Tribunal because of shortage of staff, lack of experienced staff being employed from outsource agency. The delay, if any was in getting a copy of the order, it cannot be attributed to the conduct of Presiding Officer but the Applicant by painting a different picture before the Hon'ble High Court has been successful in misleading the Hon'ble High Court whereas they had remedy available before the Tribunal or the Appellate Tribunal, if he was finding it difficult to get a copy of the order. The impression conveyed by the Applicants was totally misleading to say least which did not reflect the correct factual position. Apparent reasons for the Appellant to make this approach in this manner seems to malign the institution as also they had approached the press and gave wrong news item carrying the name of the Presiding Officer. Thus, the Applicants had been successful in maligning the judicial forum to some extent otherwise the conduct of the Applicants is well reflected from their action either in seeking adjournments or from the orders passed on the interim Application. This is also reflected from the fact that when the Hon'ble High Court had granted stay to the Applicants, the Applicants were more interested in getting adjournment rather than seeking the decision. The Applicants were successful in bringing disrespect to the institution also on the fact that the Respondent Bank did not represented the facts properly also and the Hon'ble High Court had to make adverse remarks purely because of facts produced by the Applicants in a distorted manner.
So far as merits of this application is concerned, only grievance of the Applicant in the entire pleadings are that they are owners being lessee in the premises and claimed to have ownership on all the plant and machinery and denied hypothecation. The documents which are in the shape of bundle of different type of bills are nothing to do with the inventory prepared by the bank and the documents in the shape of Annexure R2 and R4, Term Loan Agreement clearly shows that the properties including plant and mach
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inery existing as well as future block assets along with mortgaged land measuring 7.73 acre, building constructed on that land are under the charge of the Bank. Not only this, even document of hypothecation of assets to secure Term Loan itself shows that the properties are duly mortgaged with the Bank. Moreover, it could not be denied that the funds were being siphoned off, even the restructuring/renewal, by which they themselves have promised that the said factory land and building shall be sold and sale proceeds shall be deposited with the bank (Exh. R1) and thereafter the Applicants who are nothing but self created sister concern of closely related family member has tried to mislead court at the initial stage and thereafter before Hon'ble High Court, but has failed to prove that the Bank has no charge over these properties. In fact its a collusive attempt of the Applicants and the Resp. No. 2 to defraud the Bank which is repeatedly reflecting from the letters written by the Resp. No. 2 to the Bank as proved through letter dt. 17.06.2013, 27.06.2013, about the admission of the week financial strength of the Resp. No. 2 who used the Applicants through fake and sham transaction and we admit that the Applicants are successful in stretching this matter for a considerable time. Since the Bank has duly proved its case through documents Exh. R1 to Exh. R5 that it has rightly proceeded against the entire plant and machinery lying in the unit being hypothecated by Resp. No. 2 and over which the charge of the Bank still exists in record of Registrar of Companies, I have come to the conclusion that the action taken by the Bank is absolutely in accordance with law just and proper. 8. Accordingly this SA is dismissed. Any application pending stands disposed of. 9. Order Dasti to the concerned parties. 10. File be consigned to record.